6. Opening of a branch

6.3. Calculation of Spanish corporate income tax

Below is a simple example of how Spanish corporate income tax and nonresident income tax is calculated on the profit obtained by a Spanish subsidiary or by the branch in Spain of a foreign company, respectively. (For further information, on these taxes, see section 2.1. of Chapter 3).

Parent company in

	UE country (1)	Treaty country	Non-treaty country
Subsidiary:
Profit of Spanish subsidiary	100	100	100
Spanish income tax (25%) (2)	25	25	25
Dividends	75	75	75
Withholding tax on dividends	– (4)	7.5 (5)	14.25 (3)
Total tax in Spain	25	32.5	39.25
Branch:
Profit of Spanish branch	100	100	100
Spanish income tax (25%) (2)	25	25	25
Profit remitted to the parent company	75	75	75
Withholding tax	– (4)	– (6)	14.25 (3)
Total tax in Spain	25	25	39.5
(1) Spain has tax treaties in force with all EU countries except Denmark.
(2) The general corporate income tax rate is 25%.
(3) Withholding tax rate = 19%.
(4) Exempt, provided certain conditions are met.
(5) The withholding tax rate on dividends used in this example is 10% (the most common rate in the tax treaties entered into by Spain).
(6) The branch profit tax will apply if provided for in the corresponding tax treaty (e.g. the U.S., Canada and Brazil).